Deposit replacement schemes are becoming increasingly popular with both letting agents, landlords and tenants alike - but how do they actually work? In a nutshell, deposit replacement schemes are services taken out by either tenants or letting agents to provide protection to the landlord against any potential breaches of the tenancy agreement. In most cases the tenant pays a non-refundable fee instead of a traditional deposit of five or six weeks’ rent.
The product then provides the landlord with the protection equivalent/more to a traditional deposit, should any costs not be recovered from the tenant. Tenants who choose to pay for a deposit replacement scheme will still be fully responsible for paying rent and fulfilling the terms of the tenancy agreement.
We’ve put together a quick guide to the pros and cons of deposit replacement schemes for tenants, landlords and letting agents.
Traditional deposits are still the preferred method by some majority, however the amount of people choosing deposit replacement services is growing. Along with new and innovative products, the growth of this sector comes down to engagement and education of both landlords and tenants.
There are a number of reasons why tenants are taking up the service -from the ability to reduce the pressure on the initial monthly bills, releasing a previous traditional deposit and utilising it to furnish the property to just wanting to keep their money in their bank account - and the demographic of tenants choosing deposit replacement schemes is broad.
Oh Goodlord Limited is an Appointed Representative of Goodlord Protect Limited for general insurance products and credit broking. Goodlord Protect Limited is directly authorised by the Financial Conduct Authority, registration number 836727. You can check this information on the Financial Services Register by visiting www.fca.org.uk/register or by telephoning 0800 111 6768 (Freephone) or 0300 500 8082 from the UK. The FCA is the independent watchdog that regulates financial services.